WWD.com/beauty-industry-news/financial/alliance-boots-profits-rise-25-6934504/
government-trade
government-trade

Alliance Boots Profits Rise 25%

Revenues in the year ended March 31 declined 2.6 percent to 22.41 billion pounds, or $35.39 billion.

LONDON — Net profits at Alliance Boots, the privately owned pharmaceuticals, health and beauty giant, climbed 25 percent to 741 million pounds, or $1.17 billion, with sales of Boots No7 products bestsellers on both sides of the Atlantic.

Revenue in the year ended March 31 declined 2.6 percent to 22.41 billion pounds, or $35.39 billion, although on a constant currency basis it rose 0.6 percent. All figures have been converted from the pound at average exchange rates for the 12-month period.

Executive chairman Stefano Pessina, who described the past year as “transformational” due to Boots’ strategic partnership with Walgreens, said profit margins across the categories had grown despite flat or slowing sales.

RELATED CONTENT: WWD Earnings Tracker >>

Pessina said during a news conference at Boots’ London headquarters that due to supply chain and cost efficiencies, a strategic product mix, the success of in-house brands such as No7 and the newly relaunched Botanics and an increase in the sale of generic medicines, margins had remained strong.

“We continue to be confident about our prospects and ability to pursue profitable growth, organically, from our synergy programs and through international expansion,” said a bullish Pessina.

“In a world where globalization is increasing at a pace, our transformational partnerships put us together in a unique position to become the clear world leader in both pharmacy and pharmaceutical wholesale,” he added.

In the pharmaceutical division, Pessina said he would be looking to “crystallize” international deals that are already in the pipeline, and that further growth in China was in the cards.

“We are looking for further investments and partnerships in China. We are already present in 17 provinces, and we want to have a national network,” he said. He cautioned, however, that while deals can happen quickly, he’s not planning on making any announcements in the next week.

With regard to Boots’ health and beauty division, Pessina said the company was not looking to acquire beauty companies, but rather to develop brands and exclusive products in-house. “That is our skill — we develop brands,” he said, adding that there is “substantial room” to expand manufacturing, research and development.

During the last fiscal year, Walgreens and Boots also formed Walgreens Boots Alliance Development, a new joint venture based in Bern, Switzerland. It is the headquarters of a team seconded from both companies.

In the U.S., at Walgreens and Target, another major Boots stockist, bestsellers included No7 Protect & Perfect antiaging creams and serums and products from the Boots Expert range of creams and dental products, according to Alex Gourlay, chief executive of the health and beauty division.

The health and beauty division posted a profit increase of 6.8 percent to 865 million pounds, or $1.37 billion, the lion’s share of which came from the U.K. Revenue in the division was down 2.5 percent to 7.48 billion pounds, or $11.82 billion, with the bulk once again coming from the U.K.

Revenue in beauty and toiletries increased 1.2 percent to 2.18 billion pounds, or $3.44 billion, with gross margin increasing in all subcategories other than hair care. The company said that sales of premium beauty products and accessories were “particularly strong,” while fragrance sales were lower, mainly during the Christmas season when there was significant competitor discounting.

Health and beauty sales to U.S. retailers were up 12 percent during the year, and the No7 line launched at the new Walgreens store in Hollywood.